Home | Reform of empty rates relief

Reform of empty rates relief

20 March 2008

From 1 April 2008 full rates will be payable in England and Wales on empty business premises once initial exemption periods have expired.

The exemption periods are:

• Office and retail premises, three months’ relief;
• Industrial and warehouse premises, six months’ relief.

After those periods, full business rates are payable, subject to limited exceptions. Currently office and retail premises are only subject to 50% rates after the exemption period and industrial and warehouse premises have a permanent exemption.

Exemptions from empty property rates include:

• Listed buildings;
• Companies in administration (currently this is only to apply in England – the Welsh Assembly has yet to consider this exemption);
• Companies in liquidation and individuals subject to bankruptcy proceedings;
• Rateable value of less than £2,200 (so very low market rental value); 
• Property held by a charity and appears likely to be next used for charitable purposes (currently a charity pays 10% empty property rates);
• Property held by a community amateur sports club and appears likely to be next used for the purpose of the club (such clubs currently pay 10% empty property rates).

The reforms are introduced by the Rating (Empty Properties) Act 2007 and by forthcoming regulations, yet to be published by the Government and the Welsh Assembly.

In its Consultation on certain aspects of the reforms for England, the Department for Communities and Local Government looked at anti-avoidance measures. The Government has been concerned about the potential for owners to avoid rates by making empty properties incapable of economic repair, such as by removing roofs.

The Act therefore contains a power for regulations to be made to enable a damaged property to be valuedas if the damage had not occurred. As a result of the Consultation, the Government has decided not to make these regulations in England at present and do so at a later date if there is evidence that anti-avoidance activity is taking place.

The Government’s aim for this reform is to increase the supply of commercial property, which it says should, in turn, reduce rents and improve access to premises, especially
for small and medium businesses. The concern in the property industry is that the proposed changes will have the reverse effect, especially on speculative development as fewer developers will risk having new properties standing empty.

The industry has lobbied the Government over the last year and suggested various compromises, such as relief of one year for empty shops and offices, but to no avail. This reform is another financial blow to businesses that already need to tighten their belts in the changing market.

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